"In an increasingly performance-oriented society, metrics matter. What we measure affects what we do. if we have the wrong metrics, we will strive for the wrong things." (p. xvii). This valid statement is not only relevant for companies but equally for our society. In 2008, Nicholas Sarkozy, President of the Republic of France, appointed the Commission On The Measurement of Economic Performance and Social Progress, headed by the three authors: Joseph Stiglitz (Nobel Prize Winner), Amartya Sen (Nobel Prize Winner), and Jean-Paul Fitoussie. The aim of the commission was to identify the limits of GDP (Gross Domestic Product) as indicator for economic performance and social progress.
GDP or GDP per capita are commonly used metrics and governments are pleased when they can report that GDP per capita has risen, say, by 5%. But these metrics have many flaws. GDP per capita does not reflect income inequality. While much economic activity occurs within the home and contributes to the well-being, it is not accounted for in the GDP. Parents taking care for their children or parents instead of having a paid job are not accounted for in the GDP. If they would use professional service organizations to take over their responsibility it would increase the GDP. Traffic jams may also increase the GDP because of the extra gasoline used. The GDP also increases after an earthquake or a car accident because of the repairs but this increase in GDP does not reflect an improvement of the well-being. They provide many more examples and conclude with a set of twelve recommendations. Well-beeing is multidimensional and requires an evaluation of several Key Performance Indicators reflecting: Material living standards, health, education, personal activities including work, political voice and governance, social connections and relationships, environment (present and future conditions), as well as insecurity (economic as well as physical).
The authors state: "The whole commission is convinced that the crisis is teaching us a very important lesson: those attempting to guide the economy and our societies are like pilots trying to steering a course without a reliable compass. The decisions they (and we as individual citizens) make depend on what we measure, how good our measurements are and how well our measures are understood. We are almost blind when the metrics on which action is based are ill-designed or when they are not well understood." (p.5).
The significance for all organizations and individuals is obvious! Thinking about the measures actually stimulates a dialogue about values and objectives. Sometimes this dialogue is even more valuable than the result but clearly the authors see value in both. A real visionary initiative and book.
The results of the commission are available at : www.stiglitz-sen-fitoussi.fr